Will traditional models of social security be enough in a country where the future of labour is being disrupted by digitalisation, socio-demographic changes and globalisation?
Anyone who studies welfare systems, particularly on providing social protection or social security for every citizen, usually goes back to the argument between the approaches defended by 19th century German Chancellor Otto von Bismarck and UK progressive economist Lord William Beveridge.
These two models have divergent objectives: While Bismarck’s is to assure a standard of living, the Beveridge system focuses on securing a subsistence level. Although there is some convergence, both models are still being practised throughout the world.
People are however more familiar with the two main components of social protection systems: contributory social insurance and tax-funded social assistance. So, are these two models still relevant in the changing landscape of future work in Kenya?
Presently, the nature of work is being shaped by global trends such as digitalisation, socio-demographic changes and globalisation. These global trends affect the social contract between employer, employee, and state, and the growing diversification of work arrangements has become a distinct feature of today’s labour markets.
Recent reports from the International Labour Organisation (ILO) and the OECD indicate that while some of the more traditional forms of employment are disappearing or transforming in the wake of labour market transformation, new forms of employment have been growing, with new emerging occupations and sectors. Many of the latter qualify as non-standard employment (NSE).
A good example is today’s gig economy characterised by the prevalence of short-term contracts or freelance work as opposed to permanent jobs, where workers are almost classified as independent contractors. What does that imply for workers’ social protection schemes?
Kenya has and will be hit hard by rapid socio-demographic changes. A clear example is the rapidly growing population of older people, which is expected to triple in the next three decades.
Given the effects of these changes, like the average life expectancy of a 60-year-old being 25 years, can pension funds pay their retirees for a quarter-century?
And will the state be able to provide social assistance such as cash transfers and subsidised health insurance to all citizens? The good or bad news, depending on one’s perspective, is that most of Kenya’s elderly remain in the labour market because they can’t afford to retire. The gap in social protection provision, coupled with the growing informality of the labour market and the country’s demographic transition, means that the implicit social contract under either the Bismarck or the Beveridge model is coming under increasing strain.
When coming up with solutions to ensure Kenyans will not be deprived of social protection throughout their life cycle, what’s clear is that there is no one-size-fits-all fix.
However, below are a few critical points that should be considered and acted on before it’s too late.
First, close the gap on population coverage and adequacy of benefits. When the benefits of pension, health insurance and welfare assistance are insufficient and have never been adjusted to inflation, this creates economic insecurity, particularly for poor and vulnerable groups such as women-led households, people with disabilities and ethnic minorities.
Coverage should be extended to NSE workers, especially the self-employed and/or working in the gig economy, who are often not covered by social protection schemes.
Extending social protection to all forms of employment will ensure better protection for workers and their families and facilitate labour market mobility.
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Second, create innovative policy and regulatory frameworks and ensure compliance. While the current labour market model is still based on the simple classification of formal versus informal economy, future work envisions a more complex landscape.
Policy innovations to enhance the coverage of social protection schemes for NSE workers are key to prepare social protection systems for future work, as will be regulatory frameworks that can adapt to cover NSE workers when they expand social insurance coverage and benefits.
Expanding social insurance schemes will reduce the state’s financial burden in providing non-contributory social protection or social assistance schemes.
Third, design sustainable financing mechanisms. This is important for social assistance or non-contributory or social protection schemes like conditional/unconditional cash transfers, old-age social pension, and disability benefits that are financed by general taxation.
While there is still room to expand social protection programmes to increase coverage, the key challenge is designing a sustainable financing mechanism, including addressing the fiscal space.
Fourth, harness new technology to improve delivery of social protection. New technology, including digital platforms and mobile services, can facilitate providing social protection to the different categories of NSE workers, whose key challenge is that they often have many different jobs, but are also occasionally unemployed.
The role of the private sector is critical in developing and expanding registration, collection, and delivery of social protection programmes.
There is plenty of space for public-private partnerships in harnessing new technology to expand social protection programmes in Kenya.
-The writer teaches social policy and administration at Pwani University